A Hand-Off of Andean Stock Indexes Marks a Deeper Market Merger

Markets · Latin America

A technical-sounding change to who runs Chile’s stock indexes is in fact the latest move in an ambitious plan to weld three Andean markets into one, large enough to win the attention of global investors.

At first glance, it reads like back-office housekeeping. Chile is changing the firm that runs its main stock indexes.

Look closer, though, and it is something bigger. It is another brick in a long-running plan to merge three markets into one.

What is changing in the Andean markets

The decision was announced this week. From the first of September, MSCI will run Chile’s two main stock indexes.

Those indexes are the IPSA and the IGPA. They are the yardsticks that track how the Chilean stock market is performing.

For a foreign reader, a stock index is simply a scoreboard. It bundles a basket of shares into one number that rises and falls.

MSCI is a global heavyweight in this business. It builds and runs many of the benchmarks that investors follow worldwide.

It takes over from a rival, S&P. The American firm had managed the Chilean indexes for nearly eight years.

The switch is meant to be seamless. The aim is to keep the indexes running smoothly so investors barely notice the handover.

The chosen reason was experience. nuam pointed to MSCI’s track record in running indexes for emerging markets.

The combined value of the three markets is sizeable. At one recent count, together they were worth several hundred billion dollars.

Who is behind the change

The company driving it is called nuam. It is the holding that has merged three South American stock exchanges.

Those exchanges sit in Santiago, Bogotá and Lima. Together they cover the markets of Chile, Colombia and Peru.

The logic behind the merger is plain arithmetic. On their own, each of these markets is small on the world stage.

Pooled together, they start to matter. Combined, the three carry a value that global investors can no longer easily ignore.

Why hand the indexes to MSCI

The goal is a single, consistent standard. nuam wants all three markets measured the same way.

MSCI already runs the others. It manages Colombia’s main index and recently took over Peru’s as well.

Chile was the missing piece. As the largest of the three, its move completes the set under one provider.

There is also a shop-window effect at play. A widely recognised name like MSCI can make a market easier for foreigners to trust.

Familiar benchmarks lower the barrier to entry. Global funds tend to follow indexes they already know and use elsewhere.

For issuers, the prize is visibility. A company in a well-tracked index is far more likely to land on an international investor’s radar.

The slow build of one market

This index switch is one step among many. The deeper work is knitting the three exchanges into a single system.

Investors in one country can already reach the others. The most liquid shares from each market have been opened up in stages.

Behind the scenes sits a shared platform. nuam is building common trading and settlement systems across all three.

A regional index already exists too. Launched with MSCI, it groups leading companies from the three countries in one basket.

That basket is meant to be useful in practice. It can serve as the foundation for products such as funds that track the region.

The shared plumbing is the harder task. Merging trading, clearing and custody across borders is slow, technical work.

Why it matters

For a foreign investor, this is about access. A unified Andean market is far simpler to study and to buy into than three separate ones.

It is also a quiet bid for relevance. The region’s smaller markets are trying to compete with giants like Brazil and Mexico for capital.

More: Latin America news in English, every day from The Rio Times.

Frequently Asked Questions

What exactly is changing?

From the first of September, the global index provider MSCI will calculate and manage Chile’s two main stock indexes, the IPSA and the IGPA. It replaces the American firm S&P, which had run them for nearly eight years.

What is nuam?

nuam is the regional holding company that has merged the Santiago, Bogotá and Lima stock exchanges into a single group. It covers the markets of Chile, Colombia and Peru, and aims to create one Andean market large enough to attract global investors.

Why does the change matter?

Putting all three markets under one global index provider creates a single, consistent standard that is easier for foreign investors to follow. Chile was the last of the three to make the switch, completing a key part of the integration.

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